LeapFrog 2004 Annual Report Download - page 94

LEAPFROG ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share and percent data)
In January 2004, the Company entered into a ten-year technology license agreement with a third party to
jointly develop and customize our respective technologies to be combined in a platform and related licensed
products. The agreement calls for contractual payments of $6,000 in license fees, payable in 2004, of which
$5,000 has been paid as of December 31, 2004. The $6,000 license fee is included in intangible assets on the
balance sheet and is being amortized on a straight-line basis over the life of the contract.
Amortization expense related to trademarks, patents and other intangible assets was $1,872, $1,144, and
$630 for the years ended December 31, 2004, 2003, and 2002, respectively. The estimated future amortization
expense related to these intangible assets is as follows:
Year Ended December 31,
2005 .............................................................. $1,848
2006 .............................................................. 1,716
2007 .............................................................. 1,421
2008 .............................................................. 917
2009 .............................................................. 817
Thereafter .......................................................... 3,228
$9,947
9. Related Party Transactions
The Company is reporting the following related party transactions that involve Knowledge Universe, LLC
and Lawrence J. Ellison, as it was a subsidiary of Knowledge Universe in 2002 and through April 2003. From
April 2003 through April 2004, Lawrence J. Ellison and entities controlled by him, Michael R. Milken, Lowell J.
Milken, and Knowledge Universe (which is controlled by Messrs. M. Milken, L. Milken and Ellison) and its
affiliates owned a majority of the Company’s voting shares. From April 2004, the Company has been a
subsidiary of Mollusk Holdings, LLC, an entity controlled by Lawrence J. Ellison, which owns a majority of the
Company’s voting shares. In April 2004, Knowledge Universe, LLC changed its name to “KU LLC” and in
October 2004, KU LLC changed its name to “Krest LLC.”
• In 2004, 2003 and 2002 the Company purchased software products and support services from Oracle
Corporation totaling $406, $569, and $280 respectively. As of December 31, 2004, Lawrence J. Ellison,
the Chairman and Chief Executive Office of Oracle Corporation, may be deemed to have or share the
power to direct the voting and disposition, and therefore to have beneficial ownership of approximately
16,750,000 shares of the Company’s Class B common stock, which represents approximately 54% of
the combined voting power of our Class A common stock and Class B common stock. Jeffrey Berg, a
former member of the Company’s board of directors who resigned in February 2005, serves on the
board of directors of Oracle Corporation.
• In August 1999, the Company purchased a 19.9% ownership interest in Knowledge Kids Media Group,
Inc., an affiliate of Krest LLC, for $2,000. Krest LLC indirectly owned 80.1% of Knowledge Kids
Media Group. Knowledge Kids Media Group owned substantially all of the voting power of Knowledge
Kids Network, Inc. Sarina D. Simon, a member of the Company’s board of directors until June 2004,
was Chief Executive Officer of Knowledge Kids Media Group and Knowledge Kids Network from
January 1999 to June 2004. Knowledge Kids Media Group was dissolved in August 2004.
• In March 2001, the Company entered into an agreement with Knowledge Kids Network, in which
Knowledge Kids Network, an affiliate of Krest LLC, agreed to develop content and provide technical
services in connection with LeapPad interactive books. The Company incurred no expenses in 2004, and in
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